by Byron York
You’ve probably heard Republicans say the Inflation Reduction Act — the massive spending bill just passed by Senate Democrats — includes provisions to hire 87,000 new Internal Revenue Service agents. The number seems too big to believe. The IRS has just 93,654 employees, according to the Office of Personnel Management. Why would Congress, in one bill, increase the IRS workforce by something like 92%? It doesn’t seem possible. It certainly doesn’t seem wise.
It’s not wise, but it is possible. And that is what 50 Senate Democrats, along with tie-breaking Vice President Kamala Harris, did when they passed the Inflation Reduction Act, which gives roughly $80 billion to the IRS between now and 2031.
The Inflation Reduction Act is the slimmed-down version of the even more massive Build Back Better bill, which failed earlier this year due to the opposition of Democratic Sen. Joe Manchin. We know a lot about the IRS provisions of the new bill because the same provisions were in Build Back Better, which the administration extensively promoted. That’s where the 87,000 figure came from. In May 2021, the Treasury Department produced a 22-page analysis of Build Back Better, and in supporting tables, the document said the bill would add 86,852 FTEs, or full-time equivalent employees, to the IRS between now and the year 2031. Do a little rounding, and there’s the 87,000.
It’s fair to say that Democrats are always searching for ways to wring more cash out of the American taxpayer. The obvious way to do that is to raise taxes. But the largest number of potential tax collections is in the vast middle of the U.S. income scale. To raise taxes on the middle class is politically unpopular. So Democrats pledge to raise taxes on the “rich” and “rich corporations.” The Inflation Reduction Act focuses on corporations, creating a minimum tax for companies with more than $1 billion in profits. As for individuals, the portion of the bill dealing with the IRS says, “Nothing in this section is intended to increase taxes on any taxpayer or small business with a taxable income below $400,000. Further, nothing in this section is intended to increase taxes on any taxpayer not in the top 1%.” Read it closely, and it doesn’t really mean anything.
The other way Democrats have sought to raise more taxpayer dollars is by beefing up the IRS. The idea is that Americans are evading all sorts of taxes, creating a “tax gap” — according to the Treasury Department, “the difference between taxes owed to the government and actually paid.” The Biden administration says tax cheats are primarily “high-income.” “In order for the IRS to appropriately focus enforcement scrutiny on high-income taxpayers and the businesses they own — which research has shown is the primary source of the tax gap — its budget must be replenished,” the Treasury Department says.
The problem is what the problem always is: The big money is in the big middle class. Americans who make more than $400,000 — that includes people right at that number up to super-billionaires — are only about 1.8% of all taxpayers, even though they account for about 25% of the nation’s income. The other 98.2%, making up about 75% of the nation’s income, is a lot bigger. And indeed, that’s where much of current IRS enforcement is focused. The same will likely be true of the new, muscled-up IRS.
“The main targets will by necessity be the middle- and upper-middle class because that’s where the money is,” the Wall Street Journal editorial board wrote recently. “The Joint Committee on Taxation, Congress’s official tax scorekeeper, says that from 78% to 90% of the money raised from under-reported income would likely come from those making less than $200,000 a year. Only 4% to 9% would come from those making more than $500,000.”
In any event, there will be a lot of increased enforcement; about $45 billion of the $80 billion for the IRS will go to investigating taxpayers. That means that not every one of the IRS’s 86,852 new employees will be auditors and examiners, but a lot of that manpower will in fact go to audits and increased scrutiny of taxpayers. Many of the targeted taxpayers will have to hire accountants to represent them in dealings with the IRS.
Also — assume the IRS does, in fact, need more money for enforcement. How much is too much? It can be difficult for an organization to handle a huge windfall; it’s just too much to deal with efficiently. And that is what, it appears, Democrats have done to the IRS.
Last year, The New York Times interviewed John Koskinen, who headed the IRS under Presidents Obama and Trump. “Koskinen … said he thought the $80 billion being proposed by the Biden administration might be too much,” the paper reported. “The suggestion was surprising coming from someone who lamented loudly that the agency was being starved when he was in charge. ‘I’m not sure you’d be able to efficiently use that much money,’ Mr. Koskinen said in an interview. ‘… Mr. Koskinen said he thought an extra $25 billion over a decade would help bring the IRS budget back to where it was around 2010 …”
The $80 billion to the IRS is too much, too fast, with too little purpose. All Americans should be concerned about it.
